Credit card companies classify merchants operating retail stores using a business code based on the types of goods and services that a merchant provides. For instance, a merchant category code (MCC) is a four-digit number assigned to a merchant by credit card companies when the merchant starts accepting cards offered by the credit card companies as a form of payment from customers of the merchant. The MCC affects the fees that the merchant pays to the credit card companies, and determines if the merchant needs to report payments to the Internal Revenue Service (IRS) for tax purposes. Therefore, it is beneficial for a merchant to be classified using the correct MCC so that the merchant is not paying more fees than the credit card companies require and/or so that the merchant reports necessary payment information to the IRS.
Besides benefits to the merchant, there are also benefits to the credit card companies and/or customers of the merchant. For instance, credit card companies can better understand aspects of various merchant businesses, such as popularity among different business segments. Additionally, a customer's credit card statement will reflect transactions more accurately, thus reducing potential chargebacks and support inquiries.